NXPI Vs. ON Semiconductor: Stability Vs. Growth Potential In A Volatile Market

Over the past year, the semiconductor industry has seen significant fluctuations, and two notable players, NXP Semiconductors NV NXPI and ON Semiconductor Corp ON, have shown contrasting performances.

While NXP stock is up 53% in the past year, ON semiconductor stock has fallen 11.5%. This performance gap underscores NXPI’s relative stability and resilience in a volatile market.

Analysts from Mizuho and Wells Fargo have set an average price target of $318.33 for NXPI, implying a 13.18% upside. Meanwhile, for ON, analysts from Jefferies, Truist Securities, and Deutsche Bank have an average price target of $90, suggesting a 20.35% upside.

While both stocks are seen positively, ON’s higher implied upside reflects stronger growth expectations from analysts.

Recently, Mizuho Securities’ analyst Vijay Rakesh provided insights into the future outlooks of key players like NXP Semiconductors NV (NXPI) and ON Semiconductor Corporation (ON).

Related: What’s Going On With Microchip and NXP Semiconductors Stocks Friday?

The NXPI Thesis

According to Rakesh, NXPI’s price-to-earnings (P/E) ratio has been disconnected from the Semiconductor Index (SOX) since the second half of 2022, despite the company’s strong top-line growth in previous years. The company is expected to benefit from peaking inventories, potentially improving business sentiment, industrial outlooks, and global Purchasing Managers’ Index (PMIs) into the second half of 2024 and 2025.

Rakesh upgraded NXPI to a Buy rating, with a price target raised to $325, reflecting confidence in its potential to catch up with the SOX and benefit from improving cyclical trends into 2025.

The ON Thesis

ON Semiconductor Corporation (ON) is expected to see a potential bottom in the June quarter, according to Rakesh, driven by long-term secular electrification trends. Despite persisting headwinds, Rakesh maintains a Buy rating and a price target of $87 for ON, viewing the June quarter as the potential bottom for the company.

ON Semiconductor’s position as a beneficiary of long-term electrification trends suggests potential for growth, making it an interesting stock to watch despite current challenges.

While NXP Semiconductors has outperformed ON Semiconductor in terms of past year returns and stability over the past year, ON offers a more attractive valuation currently. There’s also a higher implied upside associated with ON, per recent analyst price targets.

Investors must weigh these factors when considering which stock aligns better with their investment strategy.

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